Capwire set to sign debt restructuring agreement

Capitol Wireless Inc. (Capwire) is expected to sign a debt restructuring agreement with creditor banks this month, a move seen to pave the way for the beleaguered firm's financial recovery.

Epitacio Marquez, Capwire president and chief executive officer, said yesterday that the final terms and conditions of the scheme are currently making the rounds of creditor banks.

The banks, he pointed out, are already amenable to the proposed repayment plan but are only awaiting official approval of their respective board of directors for closure of the deal.

Capwire's creditors include the Land Bank of the Philippines, Philippine National Bank, Urban Bank, Development Bank of the Philippines, United Overseas Bank Philippines Inc., Far East Bank and Trust Co., and Equitable PCI Bank.

The program involves the P908.83-million loan obligations incurred by Capwire, primarily caused by the sudden increase in interest rates brought about by the Asian economic crisis which started in 1997.

Under the arrangement, 75 percent of Capwire's total debt amounting to P681.62 million will be paid in eight years, inclusive of a two-year grace period.

The remaining P227.208 million will be settled in nine years with three years' grace period.

The interest rate will be based on the 91-day Treasury bill plus a two-percent spread per annum subject to quarterly repricing.

At the same time, there will be an interest rate cap of 15 percent per annum subject to quarterly repricing.

At the same time, there will be an interest rate cap of 15 percent per annum subject to a yearly review of the firm's actual earnings before interest and taxes (EBIT).

Once the annual review of Capwire's performance shows a 20-percent positive variance on the EBIT of actual versus projected revenue, an interest rate of 91-day T-bill plus two percent will be charged and the rate cap lifted.